Hedge Funds Cleared To Bring Class Action Against Tyson

An interesting twist on the normal securities class action. The Associated Press reports that Judge Robinson of the D. of Del. has granted class action status to a suit against Tyson Foods, Inc. (NYSE: TSN) alleging securities fraud in connection with Tyson’s 2001 acquisition of beef-packing giant IBP Inc.

The plaintiffs, a group of hedge funds who were seeking to arbitrage the merger, allege that on March 29, 2001, Tyson falsely stated that it was backing out of the merger with IBP due to a government investigation into accounting discrepancies at one of IBP’s units. As a result, Tyson artificially deflated the price of IBP’s stock. Tyson eventually completed the acquisition in September 2001. The plaintiffs seek to represent all IBP shareholders who bought on or before March 29, 2001, and then sold their shares following Tyson’s announcement.

Quote of note: “In her 20-page opinion, Robinson said Tyson had contended the lead plaintiffs’ sophistication ‘cuts against a finding that a class action is a superior forum’ for resolving such claims. But she said that argument conflicts with Congress’ intent. ‘Federal securities laws do not protect investors any differently, and certainly no less, simply because they engage in more complicated investment strategies,’ she wrote.”

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